World Trade v. Czarnikow Sugar

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World Trade Corporation Ltd v C Czarnikow Sugar Ltd
English High Court, Commercial Division: Colman J.: 18 October 2004
A company representative for World Trade Corporation
Simon Rainey QC and Nicholas Craig, instructed by Richards Butler, for Czarnikow Sugar
In this case the judge held that criticising a panel of arbitrators for not giving enough weight to a piece of evidence was not sufficient basis to challenge the award for serious irregularity under s.68 of the Arbitration Act 1996

DMC Category Rating: Confirmed

This case note is based on an Article in the November 2004 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA. DLA is an International Contributor to this website

By a contract dated 10 April 1996, Czarnikow sold 10,000mt of sugar to World Trade Corporation (WTC). It was a term of the contract that WTC would provide a US$350,000 deposit as security for its performance and that it would pay by means of a letter of credit to be opened prior to shipment.

No letter of credit was opened. Czarnikow accepted this as a repudiation terminating the contract and sold the sugar to other buyers at a price below the contract price. It then claimed the difference between the sale price and the contract price. WTC argued that the sugar could have been sold at a higher price and also claimed reimbursement of its deposit.

The arbitrators found that WTC was in repudiatory breach and that Czarnikow was entitled to treat the contract as terminated and to damages representing the difference between the contract price and the market price. The amount awarded, however, was less than the US$350,000 deposit. Accordingly, there was a balance due to WTC of US$39,600, plus interest.

WTC sought to challenge the award under s.68(2)(d) of the Arbitration Act 1996 on the grounds of serious irregularity because the tribunal had failed to deal with all the issues put to it. It said that the arbitrators had not given sufficient weight to particular features of the evidence.

Czarnikow argued that the right to apply to the court under s.68 was subject to certain restrictions set out in s.70, in particular, that the party appealing must first have exhausted any available recourse under s.57(3). This allows a party to apply to the tribunal to correct an award to remove any clerical errors or clarify any ambiguity or to make an additional award in respect of any claim which was presented to the tribunal but which was not dealt with in the award.

The High Court judge did not agree that s.57(3) applied. WTC's real complaint was that the arbitrators had failed to attach weight, or sufficient weight, to particular evidence. But that did not mean that the arbitrators' decision was ambiguous or needed clarification. Arbitrators are not required to provide an explanation for each step they take in evaluating the evidence nor why they attach more weight to some evidence than to other evidence. It also did not follow that, because the tribunal had made no mention of certain evidence, it had failed to deal with a claim under s.57(3). "Claim" in this context did not mean a submission in support of a relevant question of fact. It meant a claim for relief by way of damages, declaration or otherwise.

But the judge also dismissed WTC's application under s.68. The irregularity (failing to deal with an issue put before the tribunal) has to be a serious irregularity that has caused or will cause serious injustice to the applicant. The section is, therefore, confined to the essential issues of a dispute, not the reasons for determining them.

WTC's main complaint was that Czarnikow could have sold the sugar at a higher price. WTC said it had provided evidence to back this up, whereas Czarnikow had produced "next to nothing". The arbitrators’ Reasons showed that they had given little or no weight to WTC's evidence on this point. But whether the arbitrators accorded more or less weight to any particular piece of evidence was not an "issue" within the meaning of section 68(2)(d). It was merely a step in the process of resolving the issue of what loss, if any, had been suffered. Consequently, WTC had no grounds to challenge the arbitrators' decision under section 68.



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